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Adobe Digital Price Index Reports Signs of Deflation in U.S. Economy

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Adobe’s April report for consumer goods prices shows month-over-month (MoM) deflation between 0.2 and 2.4 percent for all categories Adobe is currently tracking with the exception of hotel prices, which increased by 1.6 percent. Between March 2015 and March 2016 prices for TVs, computers, flights, appliances, toys, furniture, bedding, and sporting goods dropped between 2.2 and 19.8 percent. In comparison, the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) reported between 1.1 and 16.6 percent price deflation for the same categories and time period. For sporting goods, the DPI showed three times more deflation than the CPI between March 2015 and March 2016 (4.7 versus 1.3 percent). The drop in airfares (0.9 percent MoM; 4.6 percent between April 2015 and April 2016) reveals that savings from lower jet fuel costs are getting passed on to consumers.

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Adobe Digital Price Index Reports Signs of Deflation in U.S. Economy

  1. 1. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 1 ADOBE DIGITAL ECONOMY PROJECT APRIL 2016
  2. 2. OVERVIE W Adobe Digital Index background Basedon analysis ofaggregated and anonymous datafromAdobe MarketingCloud: • AdobeAnalyticsandAdobeMobile Services Thousands ofbrands worldwideincluding twothirdsofFortune50 companies relyonAdobe MarketingCloud: • $7.50ofevery $10spent online withtop500U.S.retailersgo throughAdobe MarketingCloud ** • Adobe MarketingCloud powers: • 20ofthetop30U.S.employers • 9 of10largest hotel groups • 7of10largest airlines **LatestIRTop500 Report 2015 Adobe Analytics Adobe MobileServices
  3. 3. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 3 Digital Price Index (DPI) JobSeeking Index (JSI) Digital Housing Index (DHI)
  4. 4. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 4 Main takeaways:April • Our Digital Price Index (DPI) shows strong signs of deflation in the goods and services we currently cover that are bought online • Categories showing the most month-over-month deflation in April were computers and tablets, with hotels and international flights as the only categories showing month-over-month inflation • In categories such as sporting goods, the DPI shows 3x more deflation than the CPI for the last year • In groceries, prices have decreased for two consecutive months after two months of price increases • For computers, steep price declines in March and April are almost as big as the ones observed during the 2015 holiday shopping season • Overall flight prices decreased significantlyYoY, a strong sign that savings from lower jet fuel prices are being passed on to consumers -- especially in domestic routes, which saw the highest deflation • Domestic hotel prices have increasedYoY, a sign that consumers may be taking their savings from flight bookings and spending on hotel accommodations
  5. 5. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 5 Digital Price Index (DPI)
  6. 6. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 6 DIGITAL PRICE INDEX Economist Advisors Austan Goolsbee, University of Chicago  Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business  Formerly served as President Obama’s Chairman of the Council of Economic Advisers  The youngest member of the cabinet of President Obama Pete Klenow, Stanford University  Professor, Department of Economics, Stanford University  Currently Visiting Scholar, Federal Reserve Bank of San Francisco  Member of editorial boards for Econometrica, American Economic Review, Quarterly Review of Economics and others
  7. 7. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 7 DIGITAL PRICE INDEX Methodology Based on analysis of aggregated and anonymous data • Fisher Ideal Price Index • Adobe measures 80% of all online transactions from top 100 U.S. retailers ** • $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud ** • Based on analysis of 15 billion website visits and 2.2 million online products sold between April 2014 and April 2016 BLS: Consumer Price Index Adobe: Digital Price Index Quantities Sold No Yes Products/quantities updated Every 4 years Daily Number of Products 83 thousand (all categories) 2.2 million (currently covered categories) Data Collection Frequency Bi-Monthly Daily Data Availability Monthly Daily Offline Prices Yes No Long history Yes No All categories of spending Yes No ** Latest IR Top 500 Report 2015
  8. 8. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 8 DIGITAL PRICE INDEX • Electronics see an average of 80% of online spend on new* products** • 16% of monthly online spend for groceries on new products * Products that have been available for 1 year or less ** A product is defined as an item for purchase which has an unique identifier (such as Measuring rapidly shifting consumer preferences
  9. 9. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 9 DIGITAL PRICE INDEX • DPI captures the effect of major discount holidays like Black Friday and Cyber Monday because it measures quantities and does so in real-time • Lowest prices for TVs in 2015 were Thanksgiving and Black Friday • Data demonstrates retailers trying to start sales earlier – the Sunday and Monday before Thanksgiving saw low prices The Importance of detail: Black Friday
  10. 10. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 10 • The dataused contains transactions for~300 K productsbetweenApril 2014andApril 2016 • Productsinclude small equipmentand accessories (balls, gloves, uniforms)as well as large equipmentsuch as treadmills, weightliftingtools etc. SportingGoods methodology
  11. 11. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 11 DIGITAL PRICE INDEX Sporting goods see much higher deflation than CPI * CPI category “Sporting Goods” used for comparison • Between April 2015 and April 2016, DPI shows cumulative deflation of 5.5% YoY • For April, prices decreased 0.7% vs March MoM • Between March 2015 and March 2016, DPI shows cumulative deflation of 4.7% YoY • For the same period, CPI* reported cumulative deflation of 1.3% YoY
  12. 12. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 12 • The dataused contains transactions for~370K flight routesbetween March 2015andApril 2016 • Includesassociatedfees,whereapplicable Flights methodology
  13. 13. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 13 DIGITAL PRICE INDEX Flight prices down 4.6% YoY • Between April 2015 and April 2016, DPI shows cumulative deflation of 4.6% YoY • For April, prices decreased 0.9% vs March MoM • Between March 2015 and March 2016, DPI shows cumulative deflation of 4.7% YoY • For the same period, CPI* reported cumulative deflation of 1.4% YoY * CPI category “Airline fare” used for comparison
  14. 14. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 14 DIGITAL PRICE INDEX Domestic flight prices down 6.5% YoY • Between April 2015 and April 2016, DPI shows cumulative deflation of 6.5% YoY • For April, prices decreased 1.2% vs March MoM • Main deflation cities in April were Phoenix, Dallas, Miami & Los Angeles • Main inflation cities in April were Seattle, New York, San Jose & Boston * No CPI category exists for comparison
  15. 15. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 15 DIGITAL PRICE INDEX International flight prices down 1.7% YoY • Between April 2015 and April 2016, DPI shows cumulative deflation of 1.7% YoY • For April, prices increased 0.5% vs March MoM • Main inflation cities in April are for London, Cancun and Shanghai • Main deflation cities in April were Manila, Vancouver and Guanajuato (Mexico) * No CPI category exists for comparison
  16. 16. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 16 • The dataused contains transactions for~250K hotelpropertiesbetween March 2015andApril 2016 • Includesassociatedfees,whereapplicable Hotels methodology
  17. 17. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 17 DIGITAL PRICE INDEX Domestic hotel prices increase by 2.8% YoY * CPI category “Other lodging away from home including hotels and motels” used for comparison • Between April 2015 and April 2016, DPI shows cumulative inflation of 2.8% YoY • For April, prices increased 1.6% vs March MoM • Main inflation cities in April are New York, Chicago, Boston, Seattle & San Francisco • Main deflation cities in April were Orlando, Miami, Ft. Lauderdale and Tampa • Between March 2015 and March 2016, DPI shows cumulative inflation of 2.9% YoY • For the same period, CPI* reported cumulative inflation of 1.1% YoY
  18. 18. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 18 DIGITAL PRICE INDEX International hotel prices increase 2.2% YoY • Between April 2015 and April 2016, DPI shows cumulative inflation of 2.2% YoY • For April, prices increased 1.7% vs March MoM • Main inflation cities in April are Toronto, London, Vancouver, Montreal & Paris • Main deflation cities in April were Cancun, San Juan, Dubai and Tokyo * No CPI category exists for comparison
  19. 19. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 19 • Our datasetcoversan estimated 30-40% ofall online grocerypurchases.Itcontains transactions for~195kproducts (2015-2016)and isheavily comprisedofgroceries bought online and picked-up in store • The percent ofshoppersbuying groceries online issmall,butgrowing by 35%YoY asof February • The mix ofgroceryproductsbought online isnotthesame asoffline– thetopcategoryforonline shoppingisdrinks (nonalcoholic),while forofflineshoppingitismeat • Still, a significant portion of online grocery shopping is dedicated to meats, dairy, fruits and vegetables – more than 50% • When itcomes toproductswherethere’slittlesubstitution possibleand consumer choice isminimal (likemilk and eggs), the DPI tracks almost perfectly with theCPI.This is a good indication that prices online match offline prices well Groceries methodology
  20. 20. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 20 DIGITAL PRICE INDEX Online Groceries prices down again • Between April 2015 and April 2016, DPI shows cumulative inflation of 0.5% YoY • For April, prices decreased 0.2% vs March MoM • Main deflation in April for meats, juices & nonalcoholic drinks • Between March 2015 and March 2016, DPI shows cumulative inflation of 0.5% YoY • For the same period, CPI* reported cumulative deflation of 0.5% YoY * CPI category “Food at Home” used for comparison
  21. 21. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 21 • The dataused contains transactions for~173K productsbetweenApril 2014 andApril 2016 • Productsinclude interiorand exteriorfurniture,mattressesand otherbedding products Furniture and bedding methodology
  22. 22. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 22 DIGITAL PRICE INDEX Furniture and bedding prices decrease * CPI category “Furniture and bedding” used for comparison • Between April 2015 and April 2016, DPI shows cumulative deflation of 2.8% YoY • For April, prices decreased 0.5% vs March MoM • Main deflation items in April are dining sets • Between March 2015 and March 2016, DPI shows cumulative deflation of 2.2% YoY • For the same period, CPI* reported cumulative deflation of 1.1% YoY
  23. 23. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 23 • The dataused contains transactions for~110K productsbetweenApril 2014 andApril 2016 • Productsinclude large appliances such asfridges,ovens,washers,dryersaswell assmaller appliances such as vacuums, mixers,blenders etc. Appliances methodology
  24. 24. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 24 DIGITAL PRICE INDEX Appliances prices not decreasing as fast as electronics * CPI category “Appliances” used for comparison • Between April 2015 and April 2016, DPI shows cumulative deflation of 4.9% YoY • For April, prices decreased 1.1% vs March MoM • Main deflation items in April are refrigerators and washers • Between March 2015 and March 2016, DPI shows cumulative deflation of 4.8% YoY • For the same period, CPI* reported cumulative deflation of 3.2% YoY
  25. 25. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 25 • The dataused contains transactions for~249 K productsbetweenApril 2014andApril 2016 • Productsinclude toys,games aswell asplayground equipment Toys methodology
  26. 26. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 26 DIGITAL PRICE INDEX Toys see most deflation since holidays * CPI category “Toys” used for comparison • Between April 2015 and April 2016, DPI shows cumulative deflation of 7.6% YoY • For April, prices decreased 1.6% vs March MoM • Between March 2015 and March 2016, DPI shows cumulative deflation of 5.3% YoY • For the same period, CPI* reported cumulative deflation of 7.7% YoY
  27. 27. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 27 • The dataused contains transactions for~1MproductsbetweenApril 2014andApril 2016 • Productsspan across dozens ofdifferentcategories such astelevisions, laptops,Blu-ray players,desktops,tablets, wearables,headphones, video games, printersetc. Electronics methodology
  28. 28. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 28 DIGITAL PRICE INDEX Deflation of Electronics continues • Prices for electronics decreased 9.5% between April 2015 and April 2016 YoY • For April, prices decreased 1% vs March MoM • Main deflation in April happening in computers, televisions and tablets * No CPI category exists for comparison
  29. 29. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 29 DIGITAL PRICE INDEX Continued deflation of Televisions * CPI category “Television” used for comparison • Between April 2015 and April 2016, DPI shows cumulative deflation of 19.7% YoY • For April, prices decreased 1.6% vs March MoM • Between March 2015 and March 2016, DPI shows cumulative deflation of 19.8% YoY • For the same period, CPI* reported cumulative deflation of 16.6% YoY
  30. 30. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 30 DIGITAL PRICE INDEX Strong deflation in Computers • Between April 2015 and April 2016, DPI shows cumulative deflation of 13.9% YoY • For April, prices decreased 2.1% vs March MoM • Between March 2015 and March 2016, DPI shows cumulative deflation of 13.6% YoY • For the same period, CPI* reported cumulative deflation of 7.2% YoY * CPI category “Personal computers and peripheral equipment” used for comparison
  31. 31. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 31 DIGITAL PRICE INDEX Tablet prices declining again • Between April 2015 and April 2016, DPI shows cumulative deflation of 20.9% YoY • For April, prices decreased 2.4% vs March MoM • This is an important category not specifically broken out in the CPI
  32. 32. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 3 2 Job Seeking Index (JSI)
  33. 33. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 33 JOB SEEKING INDEX Methodology Based on analysis of aggregated and anonymous data from more than 1 billion visits to U.S. employment-search websites and top employer career pages from April 2015 through April 2016.  Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**
  34. 34. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 34 JOB SEEKING INDEX Online Job Seeking declines • US online job seeking is down 11.8% YoY in April • Government reported March Unemployment Rate higher at 5.1% (down 8.9% YoY) • Government reported February Unemployment Rate 4.9% (down 10.3% YoY)
  35. 35. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 3 5 Digital Housing Index (DHI)
  36. 36. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 36 DIGITAL HOUSING INDEX Methodology Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites between April 2015 and April 2016.
  37. 37. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 37 DIGITAL HOUSING INDEX Online housing search growth slows • Online search for purchases and rentals up 19.1% YoY in April • NAR reports existing home sales increased 1.7% YoY in March
  38. 38. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 38 DIGITAL PRICE INDEX
  39. 39. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 39 Appendix 39
  40. 40. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 40 DIGITAL PRICE INDEX Digital Price Index: Fisher Ideal Price Index 𝑖=1 𝑛 𝑃𝑖𝑡 𝑈𝑖𝑡−1 𝑖=1 𝑛 𝑃𝑖𝑡−1 𝑈𝑖𝑡−1 ∗ 𝑖=1 𝑛 𝑃𝑖𝑡 𝑈𝑖𝑡 𝑖=1 𝑛 𝑃𝑖𝑡−1 𝑈𝑖𝑡 • The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period (previous month) to determine actual consumer’s preferences. Instead of assuming that consumers preferences for what goods to buy are constant over a certain number of years, it is able to account for the fact that they are constantly changing what they buy. 𝐹𝑖𝑠ℎ𝑒𝑟 𝜋 𝑡 =
  41. 41. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 41 DIGITAL PRICE INDEX Methodology Comparison: Fisher, Laspeyres and Paasche
  42. 42. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 42 DIGITAL PRICE INDEX Annual Cumulative Inflation Rates
  43. 43. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 43 DIGITAL PRICE INDEX Electronics Deflation in Detail • The average price paid for an iPad mini (all models) has decreased by about 40% since the iPad mini 1 was introduced in November 2012. • Although the initial price tag of new models remains constant at around $400, the automatic discount of previous models causes the average price to consistently fall: when the iPad mini 3 was introduced at an average price of $450, the price for the iPad Mini 2 was reduced by 25% to $300. • This data only includes iPad minis sold in retail websites
  44. 44. ADOBE DIGITAL INDEX |Adobe Digital Economy Project 44 DIGITAL PRICE INDEX Job Seeking Online: Traffic Sources • Direct traffic to employment-listing websites is higher than search traffic • Search ranks second

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